Question

A)McDonald’s offered toys that portrayed the characters in the movie The Incredibles for free with the purchase of a Happy Meal.  The giving away of these toys is an example of the use of what type of promotional tool?

A options:

	Sweepstake
	Deal
	Rebate
	Allowance
	Premium

B)

Which of the following is a commonly used pricing strategy that involves payment to an intermediary for promoting a manufacturer’s products?

B options:

	Price bundling
	Zero percent financing
	Quantity discount
	Promotional allowance
	Seasonal discount

C)

A __________ contains specific goals assigned to a salesperson, sales team, branch sales office, or sales district for a stated time period.

C options:

	last year/current year sales ratio report
	sales call report
	sales quota
	selling expense report
	income statement

D)

Jane Caplow owns a picture-framing shop, The Caplow Company.  The average price she receives for a picture she frames for a customer is $120.  This price must cover her average costs for a typical framed picture of $5 for glass, $2 for matting, and $13 for the frame, and $30 for the labor involved.  She must also cover monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $3,500 for her salary.  Caplow is considering buying an automatic mat-cutting machine in order to reduce the number of hours of direct labor required to produce a framed picture.  In considering this purchase, she should recognize this purchase will _____ Caplow's variable cost and _____ Caplow's fixed cost.

D)

	increase; decrease
	have no effect on; have no effect on
	decrease; increase
	increase; increase
	decrease; decrease

E)

Which of the following is a typical example of a fixed cost?

E)

	hourly wages
	sales commissions
	production goods
	raw materials
	building rental expense

Answer 1

A. Deal

In this type of promotions different kinds of offers are put forward to customers which are known as deals. They can choose any deal which suits them the best.

Whereas sweepstaking means, offering a prize randomly to the participants. They usually ask for basic information and winners are selected on a random basis and prizes are distributed to them.It is done to increase the awareness of the product.Rebate means offering discount on the final price.

B. Promotional allowance

Allowances or discounts are given to the intermediaries by suppliers/manufacturers so that intermediaries can carryout promotional strategies for their products on their behalf.This can boost the demand for the products. Suppliers support to the intermediaries and retailers plays crucial role in marketing of the product.

Price bundling is offering different products bundled together for a discount. Zero percent financing is offering product with finance option where interest payable is zero i.e., No cost EMI. Quantity discount is discount availed when purchased in large quantities. Seasonal discounts are offered according to the high demand or low demand season

C sales Quota

In sales quota targets are set for all the persons related to sales department. Different types of targets are set for different levels of managers.

Lastyear/current year sales ratio report compares the last year sales to current sales to see whether performance has increased or decreased.Sales call report is a report maintained by people in sales department which contains all necessary details of the persons who are approached by sales people for sales.Selling expense report records the expenses incurred for selling activity.Income statement determines profit/loss after considering all expenses and revenues.

D. Decrease, increase

Variable costs are those costs which change with change in output. Fixed cost remains constant irrespective of the output.

In this case labour cost is variable cost, as the labour cost will be incurred only when there is a order to be fulfilled and paid accordingly.

Purchasing a machine will decrease the labour time which in turn reduces the labour cost,i.e., reduces the variable cost.

But the machine has certain useful life after which it cannot be used due to wear and tear or obsolescence. Therefore depreciation is charged accordingly which is fixed in nature. Because machine depreciaties due to time or usage . Even if there are no orders machine gets depreciated over time, Hence it is a fixed cost.

So Depreciation expense is added additionally which in turn increases fixed cost.

E. Building Rental expense

Building rent is fixed irrespective of the time spent in the building.

All other expenses given are variable in nature which changes with change in output.